MOSL: KNR CONSTRUCTION (Buy)-Building strong momentum – a beat on all fronts
KNR Construction: Building strong momentum – a beat on all fronts
(KNRC IN, Mkt Cap USD0.5b, CMP INR228, TP INR315, 38% Upside, Buy)
- Operating performance better than expected: 1QFY19 revenue grew 16% YoY to INR5.6b, exceeding our estimate of INR4.9b, supported by smooth execution of projects in hand. Key projects contributing to revenue were KP Sagar Irrigation Project (INR1.7b; 30% of revenue), Yedula (INR500m), Madurai (INR540m) and Pollachi (INR450m). Operating profit of INR1.1b (+30% YoY), too, was above our estimate of INR0.74b, supported by better-than-expected execution. Operating margin expanded 210bp YoY to 19.7%, ahead of our estimate of 15.2%. PAT grew 10% YoY to INR740m, exceeding our estimate of INR417m. Tax rate stood at 12.3% v/s our estimate of 10%.
- Order backlog provides strong medium-term revenue visibility: As at June 2018, order backlog stood at INR59.6b (including EPC value of HAM project), providing revenue visibility of 3.2x its FY18 revenue. Of the total order book of INR59.6b, 93% comes from the Road segment and the balance from the Irrigation segment. KNR expects order inflow of INR25b to be finalized over the next 12 months from the irrigation and road sectors.
- BoT portfolio - stabilization in toll revenue collection: Both of KNRC's projects - Kerala BoT and Muzzafarpur-Baurani project - are 100% complete. Toll collection stood at INR1.6m/day for both the projects. KNR expects toll collection for Kerala BoT to improve to INR1.8m/per day once adjoining roads are fully operational.
KNR Constructions Limited. KNR Constructions Limited is an India-based holding company. The Company is a multi-domain infrastructure project development company. The Company undertakes engineering, procurement and construction (EPC) contracts, as well as build-operate-transfer (BOT) projects across various sectors, such as construction and maintenance of roads, highways, flyovers and bridges. Its range of verticals also include irrigation projects, water management, agriculture and trading business. It has completed approximately 5,890 kilometers of projects across over 10 states in India. Its urban water infrastructure management project is Challaghatta Main Valley Project, which involves the remodeling of primary and secondary storm drains, bridges/culverts and related works in Challaghatta Main Valley in Bangalore City. The Company's irrigation and water management projects include Shankara Samudram Balancing Reservoir, Eastern Kosi Canal system, Reservoir across Mathadivagu and Budpur Balancing Reservoir.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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